Digital Rent Payments During Covid-19: What Renters, Landlords Need to Know

The COVID-19 pandemic has put financial strain on many Americans. In the rental world, that has meant a surge in late and partial payments.

In fact, according to property management platform Avail, 30% of all landlords’ rents were still unpaid as of April 8. Another 18% had been paid late, and 3% were only paid in part.
This has serious repercussions for landlords and property owners who, just like their renters, need to pay the bills, too. Fortunately, while landlords have been barred from evicting tenants in many states due to the current health crisis, that doesn’t mean there aren’t options.
And one of the best (for both owners and renters)? That’d be enabling digital rent payments. Here’s what both parties need to know about paying rent online:

Digital payments: Landlord edition

For landlords struggling with late or partial rent payments, enabling digital and credit card processing options can help cash-strapped tenants make rent despite what’s going on around them.
It seems many property owners are catching on, too.
Zego, a property technology platform, has seen increased interest in credit card and digital rent payments in recent weeks. In fact, registrations for digital payments are up 25%, credit card rent payments increased 30%, and there were notable drops in check and cash payments (-40% and -14%, respectively.)
It’s no surprise, either. Not only can digital payments help bridge the gap in times of financial stress, but digital payment tools also offer:

• Streamlined rent collection: No handling cash, no depositing checks, and no interfacing with tenants. Enjoy easy, instant payouts when you need them.
• Autopayments: Most rent payment tools also allow for recurring payments, which help ensure on-time rents not just today, but for the rest of your tenants’ leases.
• Better tenant visibility: If you have a lot of tenants, online payment tools can help you have better visibility into who’s paid, who hasn’t, and who you need to keep your eye on.
• Rent reminders and other helpful tools: Once you’re on an online payment system, you can usually set up reminders and push alerts as you get closer to the first of the month. This keeps you from being the nagging landlord banging on everyone’s door come June 1.
• Better records: Digital payment tools also have the power to create automatic rent receipts, which help with bookkeeping and compliance.

If you do opt for digital and credit card payments, be sure to vet your options carefully. There are a number of platforms that allow for digital payments as well as a slew of other perks and property management benefits. Some even offer rent reimbursement if tenants are late or don’t pay up. A few options for digital payments include the above-mentioned Avail and Zego, as well as platforms like Cozy, Schedule My Rent, and TurboTenant.

Digital rent payments: What renters need to know

On the renter side, digital rent systems can be particularly helpful during the current climate, allowing the use of credit card payments when cash or check may no longer be an option.
They can also make it easier to socially distance, per CDC recommendations. Rather than meeting their landlord in person to pass off a check or cash, tenants can make their rent payments wholly online, eliminating the need for any physical contact whatsoever.
If you’re considering making a credit card payment due to COVID-19 struggles (or just to ensure social distancing), make sure you keep these tips in mind:

1. Study up on the fees: There may be an extra credit card processing fee, which essentially just means paying more in rent. If times are already tough, this probably isn’t the best move. In some cases, the landlord may pay these, so make sure you know who’s footing the bill before putting in your card number.
2. Consider using a reward-earning card: If you have to use a credit card, try to use a cash-back or reward-earning one if at all possible. This will help you whittle down that card balance faster or maybe even negate any processing fees you’re hit with.
3. Be careful with automatic payments: One of the biggest perks of digital payment systems is the recurring payment feature. You can essentially set it and forget it and never miss a rent payment again. If you go this route, be very careful about the dates you schedule your payments for. Make sure you set dates that coincide with paydays so you don’t get dinged with overdraft fees, which tend to be a lot pricier than credit card processing fees.

And if you’re having trouble making rent, be sure to talk to your landlord, too. They may be able to work with you on a payment plan or other option while you get back on your feet.

The bottom line

Adopting a digital payment system may not solve all your coronavirus-related rent problems, but it could ease the burden slightly — both for you and your tenants. Just make sure to study up on your options, be clear on the fees, and keep the lines of communication open.
https://www.fool.com/millionacres/real-estate-market/articles/digital-rent-payments-during-covid-19-what-renters-and-landlords-need-know/

The Elephant in the Room Keeping Businesses from Reopening

Yes, COVID-19 kills people. But so does a collapsed economy. Finally, states are beginning to let more businesses open. But there’s a problem. A big one, that could keep crucial businesses closed.
Georgia allowed some businesses to open on Friday. Several other states will do that on May 1.
But some businesses might not open even when they can. Why? Because an employee or customer might get COVID-19 and sue them.

As long as someone might get sick, businesses might get sued. As long they’re sued, they could lose. They could face and lose dozens or hundreds of law suits. They could lose tens of millions of dollars. That would put the small and medium-sized business under. Why risk it? Why not wait?

A Warning

Lawsuits have already been filed against businesses over COVID-19. Cruise lines were the first businesses to get hit with suits. They’ve already lost almost a billion dollars worth of business. They won’t be sailing for at least another three months. With all the suits they might lose a lot more. (Suits against them have been hard to win in the past, but who knows how the pandemic will change the courts?)
Other businesses look at them as a warning. Small businesses that can’t afford lawyers are going to be very worried.
Some industries require close human contact. They include hotels, hair salons, daycares, gyms and restaurants. How are they going to achieve social distancing? They can’t guarantee employees or customers will always be safe. A wrongful death lawsuit was filed against Walmart over the death of an employee.

Some of the businesses that were allowed to open in Georgia aren’t doing so. Others are opening with numerous restrictions.

Businesses Shouldn’t be Liable

What’s the answer, then?
Protect businesses from being sued. More people are proposing this. President Trump said on Tuesday that he wants to shield businesses from liability. For example, he is going to order meat processing facilities to stay open, and will sign an executive order shielding them from lawsuits.
The U.S. Chamber of Commerce and several business groups are asking Congress to set a federal standard that limits liability for employers who follow CDC guidelines. White House economic advisor Larry Kudlow says reopened businesses shouldn’t be liable for coronavirus infections. Lawsuits may put them out of business. A writer at National Review urges state legislatures and Congress to pass laws shielding them. Both see that America needs businesses opening as fast as they can.
Some states are already working on this. The House and Senate in Utah passed a bill last Thursday to protect businesses. It would make business owners “immune from civil liability for damages or an injury” when someone has been exposed to COVID-19 while on the premises doing something associated with the business.

A law enacted in March in New York protects health care facilities and volunteer organizations from both civil and criminal liability due to COVID-19. While it shields businesses from negligence, they will still be liable for willful misconduct, recklessly or intentionally inflicting harm.

Protecting Themselves

Businesses can already protect themselves in some ways. But they also remain vulnerable. Employees who contract COVID-19 at work can file a worker’s compensation claim, which removes their right to sue. And they will have to prove they contracted the illness at work, which will not be easy. However, a handful of states have shifted the burden to the employer when it comes to essential employees. The states’ laws presume that the employee caught COVID-19 at work. However, a judge in Illinois issued a temporary restraining order against the rule after business groups filed lawsuits opposing it.
Businesses can also protect themselves to some extent by following the CDC guidelines. Only healthcare facilities are required to follow the guidelines, but businesses would be wise to. A court will take that into consideration when deciding a lawsuit. That means using social distancing, providing hand sanitizer, separating sick employees and possibly providing face masks.
The U.S. Equal Employment Opportunity Commission (EEOC) is allowing employers — for the time being — to take the temperatures of on-site employees, even though this constitutes a medical exam. Businesses should also follow workplace guidelines from the Occupational Safety and Health Administration. One lawyer recommends that businesses have employees sign a waiver making them aware of potential COVID-19 exposure.
Of course, there is always a risk. Businesses with immunity might shirk their responsibility to take precautions against the virus. But so far it appears from media reports that the businesses reopening are taking great precautions. They should not be punished. The country needs them open. A sensible law should protect them.
https://www.zerohedge.com/health/elephant-room-keeping-businesses-reopening

Simon Property Group To Reopen Malls In 10 States With Strict Safety Protocols

Simon Property Group, the largest mall operator in the U.S., is preparing to reopen 49 of its properties in 10 states in coming days, according to a leaked memo obtained by several news outlets. Some retailers, however, may not participate — and many consumers are likely to remain wary of venturing into the aisles.
“Security officers and employees will ‘actively remind and encourage shoppers’ to maintain a proper distance from others and to refrain from shopping in groups. Food court seating will be spaced to encourage social distancing, and reusable trays will be banished. Play areas and drinking fountains will be temporarily closed, mall-provided strollers won’t be available and, in restrooms, every other sink and urinal will be taped off. Regular audio announcements will be made ‘to remind shoppers of their part in maintaining a safe environment for everyone,’” according to the April 27 memo sent to retailers, the New York Times’ Sapna Maheshwari and Michael Corkery write.

Employees will wear masks and Simon will “use ‘traffic measuring technology’ to limit patrons to one person per 50 square feet. Malls will also have … one-way decals to promote social distancing,” Lane Elder writes for  The Atlanta Journal-Constitution.
“Simon was among the first major REITs to voluntarily shut down its mall properties, doing so the third week of March, after a steady stream of announcements from major retailers that they would temporarily shutter their national footprints and as states took progressively stricter steps to limit the disease’s spread. Since then, most parts of the U.S. have implemented restrictions on what businesses may open and when residents may leave their homes,” Ben Unglesbee writes  for Retail Dive.
“The memo was accompanied by a 47-slide presentation of ‘illustrative examples’ of messaging that shoppers will see. They include signs welcoming them back to the malls and detailing safety precautions that have been taken.… Also part of the presentation was a depiction of a taped-off urinal, and maps for common areas that showed where hand sanitizer and seating might be placed and where ‘Temporarily Closed’ signs could appear,” the NYT’s Maheshwari and Corkery add.
“It will be left up to the retailers at these properties — such as Macy’s, American Eagle and Victoria’s Secret — to decide whether they wish to reopen for business. Many have furloughed the majority of their store workers, and it could take some time to bring them back. Retailers will also be tasked with stocking fresh inventory and selling through stale merchandise that has been sitting on shelves,” writes  CNBC’s Lauren Thomas.
“Some might be more eager than others to turn the lights back on. Nordstrom had warned its financial situation could become distressed because of coronavirus-related store closures. Gap said last week that it did not pay rent in April, adding it might not have enough cash to keep funding its operations,” Thomas adds.
“The impending reopening will give a glimpse into what life will look like as states across the country lift restrictions and allow economies to slowly reopen. The state of Georgia was the first to allow businesses to reopen this past Friday. The bigger question is how long it take for consumers to feel comfortable enough to go out shopping,” observes  Matthew Fox for Markets Insider.
“As many retailers have furloughed or laid off much of their workforce, bringing employees back could be a tricky proposition,” Madeline Stone writes  for Business Insider.
Indeed, “plans for a swift reopening of malls, factories and other businesses accelerated Tuesday, but they quickly collided with the reality that persuading workers and consumers to overlook their coronavirus fears and resume their roles in powering the U.S. economy may prove difficult,” write  David J. Lynch and Abha Bhattarai for The Washington Post.
“Consumers may have permission to go do something. But whether they go do it depends upon how badly they want to do it and how safe they feel,” William Dunkelberg, chief economist at the National Federation of Independent Business, tells Lynch and Bhattarai.
Simon, which is based in  Indianapolis, Indiana, maintains malls and outlets in 37 states and Puerto Rico.
Its “malls in Alaska, Arkansas, Georgia, Mississippi, Oklahoma, South Carolina, Tennessee and Texas would reopen Friday. Indiana malls would reopen Saturday, May 2, while Missouri malls would reopen on Monday, May 4,” Alexandria Burris writes  for the Indianapolis Star.
“More than real estate, we are a company of experiences. For our guests, we provide distinctive shopping, dining, and entertainment. For our retailers, we offer the unique opportunity to thrive in the best retail real estate in the best markets,” Simon maintains  in its “2019 Property Portfolio” document.
But for now, the properties will be offering an even more unique shopping experience of free temperature testing, as well as masks and hand sanitizer, to all comers.
https://www.mediapost.com/publications/article/350746/simon-property-group-to-reopen-malls-in-10-states.html

WeWork Rolls Out New Social Distancing Workspace Designs

Courtesy of WeWork: An example of a WeWork lounge area with the dots representing where people can sit under new social distancing measures.

 

The coworking industry leader is aiming to adapt to the coronavirus pandemic by redesigning its workspaces. WeWork last week began rolling out plans to implement social distancing measures and increase cleaning practices in its coworking spaces. It detailed the plans in a brochure to members, which a WeWork spokesperson shared with Bisnow.

The company aims to make its common areas less crowded by reducing the number of members who can sit at shared tables and limiting booth capacity to one person. It also plans to install visual guidelines such as floor stickers and monitors reminding people to keep 6 feet apart.

“By modifying shared spaces with staggered seating and buffer zones, teams can continue to operate in the workplace while still maintaining a healthy physical distance from colleagues and fellow members,” the brochure said.

An example of a community desk with social distancing measures from WeWork’s brochure.

 

To improve the cleanliness of the spaces, WeWork said it plans to add hand sanitizer and wipe stations to spaces, and install touch-free soap dispensers in restaurants and kitchens. It also said it will increase the frequency of cleaning its spaces during the workday.

The changes come as WeWork is facing a series of challenges from keeping its members — many of whom operate on short-term leases — to paying its own rent to shoring up its financial backing. The company failed to pay April rent at several of its New York City locations, the Wall Street Journal reported.

SoftBank is reportedly backing out of the $3B tender offer for WeWork shares it agreed to last year as part of its efforts bail out the coworking giant after its failed IPO. WeWork shareholders this month filed a lawsuit against SoftBank, arguing its plan to kill the deal represents a breach of contract. Ousted WeWork founder and former CEO Adam Neumann is reportedly planning to file his own suit against SoftBank. https://www.bisnow.com/national/news/office/wework-rolls-out-new-social-distancing-workspace-designs-104136

Senior Housing ‘Will Probably Take The Longest To Recover’

The coronavirus pandemic has hit senior housing residents hard. Concentrations of elderly people, especially in nursing homes, have proven tragically susceptible to COVID-19.

In the short run, from a business standpoint, the crisis means senior housing occupancies are down and costs are up. Over the long run, lingering fear among potential residents, or a long recession, might hamper future growth prospects, senior housing experts say. But others say it is possible that the previously forecast silver tsunami will survive the pandemic mostly intact, driving demand for senior housing later in the 2020s.

Nursing home responders

“Of all the asset classes, I’m most concerned about the future of senior housing,” Mizuho Managing Director of Equity Research Toyo Okusanya said. “It will probably take the longest to recover from the pandemic. The headlines about facilities overwhelmed by COVID-19 will affect people’s decision-making. People will have reservations about moving in, maybe for years to come.”

The senior housing asset class is made up of a broad spectrum of living facilities, including independent living, which are essentially apartments for an older population, and assisted living, which provides apartments but also a higher level of service for its elderly population, such as meals or group activities. The term also refers to long-term care facilities — nursing homes and memory-care — that provide healthcare services for elderly residents with chronic conditions.

The pandemic has hit this segment particularly hard. Coronavirus-related deaths at U.S. nursing homes and other long-term care facilities have topped 10,000, the Wall Street Journal estimates, based on data aggregated from state health departments. Assisted living has been impacted as well. Just since Monday, seven COVID-19 deaths were reported at an assisted living facility in McKinney, Texas; 13 residents at a Chandler, Arizona, assisted living facility have died from the pandemic; 65 residents and employees of two facilities in Sacramento County, California, have been reported infected; and South Carolina reported that 46 nursing homes and assisted living facilities had a confirmed case of COVID-19 either among residents or staff.

For now, the lease-up across the spectrum of senior housing properties has ground to a stop, and move-outs are flat or accelerating, Duff & Phelps Managing Director Ross Prindle said.

“You can’t show properties,” Prindle said. “The model of paying a lump sum to move in, that isn’t happening either. It’s come to a halt.”

Occupancy at independent living properties is relatively stable, according to a National Investment Center for Seniors Housing & Care survey of senior housing executives, but it is trending down for the rest of senior housing, including assisted living and memory care, with the deepest declines reported for nursing homes. About 40% of organizations reporting on their nursing care beds said they experienced an occupancy decline of 10% or more compared with the previous month, NIC said.

Major senior housing owner Welltower reported that between March 27 and April 10, occupancy within its senior housing portfolio, which includes independent and assisted living, fell from 85.4% to 84.2%, and the company anticipates further occupancy losses. Despite fewer customers, expenses are up, especially for assisted living and nursing homes.

Facilities now are hiring more staff, buying more protective gear, which has become more expensive as supplies have been strained, and investing in technology to connect residents with their relatives, the New York Times reports. The industry is in full crisis mode.

“On top of that, most operators don’t qualify for PPP, and the emergency funds dedicated for healthcare are mostly going for hospitals, not senior living facilities,” RSM Senior Manager and Real Estate Senior Analyst Scott Helberg said.

The largest owners, with reserves of capital and access to lines of credit, are probably best equipped to weather the storm, Okusanya said. The REITs mostly have solid balance sheets, but the smaller owners and operators will be hit hard, he said, possibly leading to closures in the near term and further consolidation in the industry later on.

No senior housing expert ventured a firm prediction about what will happen to the industry after the pandemic, but some say that there is a case for optimism in the long run, considering the nation’s demographics

“I’m bullish on the sector in the medium to long term,” said CBRE Vice Chairman Aron Will, who co-heads national senior housing debt and structured finance for CBRE Capital Markets. “There will be pent-up demand in the sector, because the need for assisted living and memory care isn’t going away. It will still be needs-driven.”

The pandemic hasn’t changed the fundamental fact that the average age of Americans is getting older, and will continue to get older over the next few decades, Will said. The shock of the pandemic might make some hesitant to enter senior housing, but even so, the sheer size of the aging generation will support growth in the sector eventually. The older population is going to go up, as is the population of the very oldest, who typically need assisted living and nursing care the most. In 2010, slightly more than 14% of the over-65 population was 85 and older. By 2050, that proportion will increase to more than 21%, the Census Bureau predicts. Those numbers were released before a pandemic that was especially deadly among the elderly swept across the globe.

Another factor that might help the industry in the long term is a slowdown in construction, which had actually started before the pandemic in response to a number of overbuilt markets, Walker & Dunlop Managing Director Mark Myers said. NIC reported that 17,062 new senior housing units started construction during the four quarters ending in March 2020, the fewest new starts for the industry since 2014.

“It’s going to slow down a lot more,” Myers said. “If nothing else, lenders are going to be much more careful about projects.”

Not everyone is sure that demographics will be enough to support senior housing growth in a post-pandemic environment. For one thing, even after the pandemic, there will be a recession, and it could be a long, painful one.

The recession will put a damper on demand for senior housing, Okusanya said, especially if it lasts long enough to hit the housing market hard. That is because most people sell their house or their investments to move into senior living in the first place (typically independent living).

The inability of people to move into independent living has longer-term ramifications for all of senior housing, Helberg said, because people tend to transition from there into assisted living or memory care.

“Demand is a concern on the independent side,” Helberg said. “In one way or another, the current crisis might encourage people to age in place longer.”

CBRE’s Will believes assisted living and memory care will do well regardless of what happens in independent living, because those sectors outperformed after the last recession.

“Institutional capital came into the sector post-recession last time, and I believe it will make the same calculation this time, because senior housing is recession-resistant, if not recession-proof,” Will said.

Beyond there being a need for senior housing, or the question of a recession, the industry will change in the wake of the crisis, and do what it needs to do to help restore confidence, Will said. Regulators will likely require better infection control, and many owners and operators will go beyond what is mandated to reassure potential residents and their adult children.

“I hope and I pray and I think that infection control is going to get a bigger focus throughout healthcare, including senior housing,” Myers said. “Most operators have been vigilant about controlling infection during the pandemic, but there have been outbreaks even at the best-run facilities, so the industry needs to do more.” https://www.bisnow.com/national/news/senior-housing/pandemic-clobbers-senior-housing-in-the-short-term-but-long-term-still-hopeful-104041

Pressure Mounts To ‘Commandeer’ Hotels For Coronavirus

Homelessness in the U.S. was already at crisis levels before the coronavirus hit. When it did, some cities began arranging for people experiencing homelessness to stay socially isolated in empty hotels.

Fort Lauderdale has been doing the opposite. In March, city commissioners voted to crack down on the homeless, moving to extend a ban on camping, which now covers downtown, to areas within 1,000 feet of any school or child care center. A second and final vote on the matter has been postponed until the coronavirus pandemic subsides.

Jeff Weinberger, a longtime homeless advocate and founder of the October 22 Alliance to End Homelessness, is organizing a demonstration Thursday to call on the city to mandate hotels be used to house Fort Lauderdale’s at-risk homeless population. He said activists will be gathering at the Broward County Government Center.

“We want to see [the city] provide motel rooms immediately to everyone in an at-risk category,” he said.

The group eventually hopes local governments can provide permanent housing for all of them.

Two weeks ago, California Gov. Gavin Newsom announced Project Roomkey to house shelter residents in 6,000 hotel rooms, City Lab reported.

Other cities followed: New York City is putting about 6,000 people in hotels. Los Angeles secured 1,700 rooms and King County, Washington, is using 400.

The governor of Connecticut ordered shelters to move residents to hotel rooms if social distancing isn’t possible.

Fort Lauderdale’s city leaders said that kids walking by homeless encampments see people doing drugs and defecating in public, the Sun-Sentinel reports. If the stricter measure were to pass, violators could be fined up to $500 and jailed for up to 60 days.

Homelessness has been a contentious issue in Fort Lauderdale for decades, with various “tent cities” popping up. In the early 2000s, the city made world news by outlawing feedings of homeless people. About a year ago, an encampment by the city’s main library was cleared and about 80 people moved into permanent housing.

But Broward County still has an estimated 2,300 people experiencing homelessness. Amid the coronavirus, some shelters stopped taking in new people last month.

Weinberger said he found it ironic that in March, when the Zandaam cruise ship docked in Fort Lauderdale with coronavirus patients, Broward County Commissioner Michael Udine suggested “commandeering” an empty hotel to isolate passengers.

“They can commandeer a hotel for people who can afford to take a huge cruise, but they can’t commandeer a hotel for people at risk or at shelters?” Weinberger said.

The federal government does have the right to seize property for emergencies, according to Hotel Management. When President Donald Trump declared a national emergency under the Stafford Act on March 13, he authorized the Federal Emergency Management Agency to use eminent domain to acquire facilities and supplies. FEMA could immediately appropriate buildings, land and supplies, but would have to compensate owners for it.

States have and are considering similar measures, and fighting them would be “an uphill battle” for any property owner, four attorneys at Carlton Fields wrote last month. So far, governments have been negotiating with hotels, not doing hostile takeovers, in hopes the facilities will be happy to have revenue coming in.

But according to USA Today, around the country, hotel executives have had reservations about taking in quarantined people, citing staff who would need proper personal protective equipment, whether they could have sufficient sanitization procedures in place, and whether those locations would fail to regain bookings when business picks up again.

In Kentucky, authorities prepared to spend to spend up to $70K to house 40 people at a Springhill Suites for the month of April — but they were turned down by the hotel, the Washington Post reported. Zoning or liability issues were cited as concerns.

The National Law Center on Homelessness & Poverty identified $190B in the CARES Act that could potentially be used toward housing people experiencing homelessness.

The homeless in Fort Lauderdale typically shower and wash at the library, bus station or fast-food restaurants — all of which are now closed. Though there hasn’t been a documented outbreak of the coronavirus among the state’s homeless, there is also no testing system in place.

The county is considering spending $550K to purchase mobile shower/restroom stations, and the head of the local Convention & Visitors Bureau is in discussions with hotels about what can be done. Some homeless advocates believe that funds should be spent expanding permanent options for the homeless, rather than on short-term hotel stays.

“[Forty] years of failed housing policy has allowed private developers to decide what housing gets built, and it’s rarely the affordable kind,” Weinberger wrote in an editorial for the Sun-Sentinel. “All with the blessings of politicians at every level of government.”
https://www.bisnow.com/south-florida/news/hotel/hotels-homeless-pandemic-104029

Cuomo Details Plans For Reopening NY – Construction Before Retail, Upstate 1st

Parts of New York could start reopening as early as May 15, Gov. Andrew Cuomo said Sunday as he outlined a two-phase plan to begin reopening the state, emphasizing that different regions will have different schedules but that the dense population of New York City will need to have at least some “summer activities” open for residents, in what appeared to be a contradiction to comments from the city’s mayor, Bill de Blasio.

KEY FACTS

Cuomo announced a two-phase plan to reopen the state, but said the timing will vary by region: upstate New York is more likely to enter the first phase after May 15 “with  certain precautions” while downstate—which includes New York City, Westchester, and Long Island—could take longer to reopen.

Phase one of reopening will include construction and manufacturing with low risk, Cuomo said.

Phase two will be more complex, Cuomo said, and rely on a matrix of which businesses are more essential and at a lower risk of infecting people.

A two-week waiting period—which is the virus’s incubation period—will happen between phases to monitor the effect of implementing each phase and the infection rate, Cuomo said.

Cuomo said reopening is dependent on a 14-day decline in the state and regional hospitalization rate, citing federal guidance from the Centers for Disease Control and Prevention.

Cuomo said downstate New York, which includes New York City, will need summer activities permitted for residents, a comment that appeared to push back against de Blasio’s idea to keep pools and beaches closed throughout the summer.

Crucial quote

“You can’t tell people in dense urban environments ‘We have nothing for you to do,’ there’s a sanity equation here,” Cuomo said.

What to watch for

What happens after May 15, which is the date New York’s stay-at-home orders expire. “We get to May 15, we assume we’ll see a decline in state for 14 days, but which regions are in decline for 14 days? That’s when you start the conversation to get to phase one in that region,” Cuomo said.

News peg

De Blasio came under criticism for saying public pools and summer camps will not be open for the season. “Keep expectations low for now,” de Blasio said April 16. Cuomo and de Blasio previously sparred over New York City school closures, after de Blasio announced the city’s public schools would remain closed for the rest of the academic year⁠. Cuomo said that power to make the decision is his “legal authority” and stressed that school reopenings must be part of a regional plan.

Key background

Cuomo said that the state will be relying on businesses to do their own analysis of how risky it would be for them to reopen. Businesses will need to provide information about what precautions and safeguards they will put in place to protect workers. “A caveat,” Cuomo said, “is you can’t do anything in any region that would increase the number of visitors to that region.” If something is opened in Syracuse that would attract visitors from New Jersey, Connecticut or downstate New York, there are fears that the coronavirus infection rate could spike again. “Coordination [between states] is important,” Cuomo said.
https://www.forbes.com/sites/lisettevoytko/2020/04/26/cuomo-details-plans-for-reopening-new-york-says-nyc-needs-summer-activities-open-for-residents/#707c5853296d

Non-force majeure legal defenses for real estate contractors and developers

The abrupt market shift as a result of the pandemic has left many wondering how to carry out contractual terms. Developers and contractors in particular have wanted to leverage the force majeure or “act of god” clauses that are standard in many contracts to renegotiate existing agreements. However, contracts without force majeure language, aren’t necessarily exempt.
“Most contracts include such provisions; however, in their absence the party seeking to be excused might look to other legal defenses outside of the contract terms,” says David Alvarado, an attorney with the Los Angeles offices of commercial real estate law firm Crosbie Gliner Schiffman Southard & Swanson. “Specifically, the defenses of impossibility and frustration of purpose have similar analyses, but do not require any force majeure clause or other contractual language.”
To use the defense of impossibility, the arguing party is—as stated— not possible, not simply difficult. “For a party to have its performance excused or delayed under the theory of impossibility, performance must be rendered impossible by an unforeseen event—more difficult or very expensive performance will not constitute impossibility,” explains Alvarado. “In connection with the pandemic, contractors may argue that their performance has been made impossible by general business conditions due to the pandemic; and government regulations that prevent them from operating.” The former will not be considered an impossibility that excuses performance, and the latter will depend on the location, although most local governments have not suspended construction.
Frustration is often argued when the agreement is prevented by no fault of the party’s involved. However, even this argument can be challenging to win. “The doctrine is limited to cases of extreme hardship where the subsequent unanticipated event almost totally destroys the value of the consideration to be rendered,” says Alvarado. “Note that if a contract contains a force majeure clause, it is less likely that a contractor can successfully rely on the doctrine of frustration to excuse its performance obligations. By agreeing to categories of events that will excuse a contractor’s performance through a force majeure clause, the contracting parties have made a clear and deliberate allocation such risk and can no longer contend that the non-occurrence of same was a basic assumption on which the contract was made.”
Alvarado notes that the concept of a force majeure clause may exist in the contract, even when the term it not used. “A typical clause might delineate specific events as grounds contractual relief, including change orders, acts of God, and labor strikes. In addition, some clauses may include broader language such as ‘causes beyond the contractor’s control,’ but counts may be required to construe such phrases narrowly, consistent with the otherwise enumerated events,” he says.
In addition, many construction contracts address delays that impact timing and costs. “Note as well that most contracts will have express notice provisions for claiming delays and additional costs, including the time limits for giving proper notice, the contents of such notice, who must be copied and the method of delivery,” says Alvarado. “In addition, some contracts include provisions by which the contractor may forfeit rights to adjustments if the notice is not timely and properly made. If an owner receives a delay claim, the contract should be carefully reviewed to make sure the claim qualifies and that the notice is timely and properly submitted with appropriate support.”
https://www.globest.com/2020/04/23/alternatives-to-force-majeure-clauses

NYC rent board report estimates 2.5% to 3.5% increases

As the mayor calls for a rent freeze, a Rent Guidelines Board report Thursday estimated that rent increases for rent-stabilized apartments should fall between 2.5 percent and 3.5 percent for one-year leases and 3.3 percent to 6.75 percent for two-year leases.

The board, in its first virtual meeting, discussed the report compiled by its staff that recommends rent increases using five different “commensurate” formulas that consider operating costs, revenues and inflation.

The formulas are designed to preserve net operating income for landlords of rent-stabilized buildings, which edged down by 0.6 percent from 2017 to 2018 to $535 monthly per apartment, the first drop since 2003, according to a previous report.
The formulas’ estimates are considered a starting point.
“You are not required by law to pick one of these formulas and go with it,” said the board’s executive director, Andrew McLaughlin.

One of the board’s tenant representatives, Leah Goodridge, an attorney for the Housing Project at advocacy group Mobilization for Justice, noted that preserving landlords’ net operating income isn’t part of the board members’ mandate.
Joseph Strasburg, president of the landlord group Rent Stabilization Association, which supports rent increases, disagreed. He said the board is supposed to provide relief from rent-stabilization restrictions.

“Why do you even need the RGB?” he said during an interview. “The fact is that it’s not following its mission.”
Thursday’s report, which reflects data from April 2019 to March 2020, found that the price index of operating costs for stabilized apartments in the city increased by 3.7 percent. The report projected it will jump by 2.4 percent between now and March 2021.
The meeting kicked off with the tenant representatives questioning the decision to hold the board’s meetings virtually, rather than canceling its proceedings. They and tenant advocacy groups had called for a rent freeze and suspension of the board, believing tenants would be at a disadvantage if they cannot make their case to the board in person.

Mayor Bill de Blasio had initially called for the same move, but later indicated that the state wouldn’t agree to cancel the hearings. He instead called on the board to freeze rents. The board’s decision will apply to rent-stabilized leases that come up for renewal beginning in October.
“I’ve heard over and over again it seems tone deaf and insensitive for us to move forward as a board,” Goodridge said.
In March, as social-distancing mandates began, landlord groups asked for the board’s meetings to be postponed. They have condemned the mayor’s calls for a rent freeze as an attempt to influence the ostensibly independent board before its proceedings even began. All nine board members were appointed by de Blasio.

The latest fight over the board’s actions highlights long-standing criticism of how it functions, which is further complicated by the coronavirus crisis. The city has nearly 1 million rent-stabilized apartments.
The board’s chairman, David Reiss, said that convening is the “one fundamental responsibility that this board has.” He said there could be unintended consequences if the board did not meet. Though he didn’t lay out what those consequences might be, board members indicated that it is unclear who would decide rent increases on stabilized apartments this year — the mayor or governor, for instance — if the board failed to meet.

Public member Christian Gonzalez-Rivera noted that meeting virtually may be the most transparent option available for determining rent increases. “If this is as public as it is going to get,” he said, “that means we have even more responsibility.”
https://therealdeal.com/2020/04/23/rent-board-report-estimates-2-5-to-3-5-increases/

Fannie, Freddie will buy loans in forbearance

Fannie Mae (OTCQB:FNMA +2.9%) and Freddie Mac (OTCQB:FMCC +3.8%) can now buy some single-family mortgages in forbearance that meet certain eligibility criteria, a move intended to “provide liquidity to mortgage markets and allow originators to keep lending,” the Federal Housing Finance Agency said.

Some borrowers have requested payment forbearance soon after closing on their mortgages and before the lender could deliver the loan to Fannie or Freddie.

Under GSE requirements, mortgage loans either in forbearance or delinquent are ineligible for GSEs to acquire.

Today’s action lifts that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria.

Those loans will also be priced to mitigate the increased risk of loss to Fannie and Freddie.

Under the CARES Act, borrowers of government-backed loans can delay monthly payments for up to a year.

With more than 3M loans already in the forbearance program, the two GSEs wouldn’t buy recently closed loans that soon entered forbearance.

That tightened credit for all borrowers, as lenders were afraid that new mortgages will go into forbearance before they can deliver them to Fannie or Freddie.

https://seekingalpha.com/news/3563163-fannie-freddie-will-buy-loans-in-forbearance

Vegetables you can plant now (indoors and out) during coronavirus pandemic

As you practice social distancing, use this time to introduce two new friends into your life: a shovel and a pair of gloves.

During stressful times, nature can be a peaceful refuge. And, coinciding with the timing of the coronavirus, we’re also at the start of something a little brighter — gardening season.

“There’s a meditative feeling you get from the repetitive tasks of gardening,” says Teddy Moynihan, founder of Plowshare Farms in Pipersville, Bucks County. “Plus it’s an action you can take to nourish yourself in the face of something that feels like we have no control over.”

While stay-at-home orders are in place, outdoor activity is still permitted, meaning you’re in the clear to venture into your backyard or garden plot. (Just don’t bring others along to watch you plant.)

And even if you don’t have green space at your disposal, you can still take part in some planting projects. Here’s a guide on how to garden now, indoors and out, as we look ahead to spring and summer produce.

“Gardening, at the core, is an act in faith of the future,” notes Moynihan.

What to plant outside now

If you have access to a garden, a variety of veggies — beets, carrots, radishes, peas, spinach, kale, and collards — can all be planted now.

Chris Price / Getty Images

Growing vegetables is just what many of us need right now.

“I really love hakurei turnips — it’s a salad turnip, mild and less spicy than a radish,” says Moynihan. “It takes just about 30 days to get a baby, ping-pong-ball sized one. As they get bigger, I like to throw them in soups, or glaze them with butter, chicken stock, and a drop of honey.”

If you live in Philadelphia or South Jersey, Moynihan says you could also get a start on lettuce and radicchio. Those in cooler parts of the region can test their luck against frosts or wait a week or two.

“Unless you’re planting potatoes or onions, most of what you plant now will be by seed,” notes Moynihan. “And for the home garden, I always recommend direct seeding. It’s hard to get enough sun and warmth to create a strong starter without a grow light, so come tomato season, I recommend trying to find those plants at a farmer’s market.”

Where to get seeds

The next time you’re buying groceries, take a look to see if your local supermarket sells seeds, too. Stores including Aldi, Mariposa, and Whole Foods often have a seed rack, enabling you to avoid an extra trip.

Otherwise, try your local hardware store, also equipped with gardening supplies. Deemed essential businesses, most hardware stores remain open, including Lowe’s and Home Depot. Some, like Fairmount Hardware, are offering online order and curbside pickup options.

Local plant shops are another place to check. Froehlich’s Farm & Garden Center in Furlong, Bucks County is one that is offering delivery and curbside pickup. In Philadelphia, Greensgrow Farms is also launching an online site and offering curbside pickup.

To order seeds online, Moynihan recommends any of the following companies: Truelove Seeds, Rohrer Seeds, Johnny’s Selected Seeds, Fedco Seeds, and Baker Creek Heirloom Seeds.

If you don’t have a yard

If you don’t have garden space but have a balcony or patio, there is a lot you can still plant.

“You can make anything grow in a container if you have a big enough container,” says Sally McCabe, Pennsylvania Horticultural Society associate director of community education.

FedericoChiccoDodiFC / Getty Images/iStockphoto

If you don’t have a garden, you can still plant vegetables right now.

This time of year, McCabe recommends planting greens and herbs, excluding basil, a warmer-weather herb. Ideally you’d start with a five-gallon bucket or larger, but you can certainly get creative, whether with a window box or old wash bin. “If all you’ve got are milk cartons, tip them on their side and fill them with soil,” says McCabe. “To pump out full-size plants, you need something bigger, but you can still end up with small and happy plants.”

Some more container gardening tips:

Make sure to cut or drill drainage holes, no matter the container, and after it rains, check on your plants. You don’t want them sitting in water.

“The more sun you have, the better they’ll do, but it’s hard to mess up herbs and greens,” notes McCabe. “If you seed too many, just thin them and eat them as microgreens.”

Make sure to place your containers close together if you decide to grow in multiple pots. McCabe explains that this will help keep the humidity higher between the plants, and the soil from drying out.

If you don’t have access to green space

“Even if you live in an apartment with no balcony, at the very least you can be growing sprouts,” says McCabe.

And you don’t need to go out and buy alfalfa seeds to do it. Pantry items like chickpeas, lentils, black-eyed peas, mung beans, and soybeans can all be turned into sprouts. The legumes need to be dried (i.e., not out of can) and they need to be whole (i.e., split peas won’t work).

You’ll thoroughly rinse the legumes before placing them in a jar with water, and covering the top with cheesecloth or other breathable material, like a sheet of paper towel. Then, the sprouting process begins.

You can find detailed information on how to sprout all sorts of legumes online, but the process for all is simple. First, soak them overnight. Then, you’ll cycle through rinsing and draining the legumes (at least twice a day) until they begin to sprout. Within two to five days, your newest salad topper will be ready. Sprouts make for a great snack as is, too.

“Most beans will sprout, and if they’re not sprouting by the fourth or fifth day, just give them a rinse and cook them as you would normally,” says McCabe.

Jowita Stachowiak / Getty Images

Sprouts are easy to grow at home.

If sprouts aren’t your thing, try microgreens (the tender, nutrient-packed shoots of veggie plants). These can be grown in a sunny window or under a fluorescent light. Seed companies like Johnny’s sell special microgreen mixes, but almost any vegetable seed will work. If available, radish, broccoli, cauliflower, and cabbage seeds are a great place to start. Plant the seeds in a soil-filled tray (or improvise with a baking dish), and from there, all you need is light and water.

Take a moment to examine your spice cabinet, too.

“If you’ve got whole dill, fennel, coriander, and mustard seeds, they can grow when planted in a flower pot with potting soil,” says McCabe. “To get the plants to full size, you’ll need six to eight hours of sun, but you can supplement with fluorescent or LED light — just no incandescent bulbs.”

Now’s also a prime time to give a little extra attention to houseplants you might already own. Repot, propagate, or dive into any other project you’ve been putting off. Some shops, like Brewerytown’s Cultivaire Plant Store, also remain open for online ordering and curbside pickup (free delivery within 2-mile radius).

Growing from table scraps

For a fun DIY project, turn your table scraps into plants.

“You can experiment with so much right from what you buy at the store — potatoes, carrot tops, celery, really any produce item that has seeds and is labeled as certified USDA organic,” says Temple University horticulturist Benjamin Snyder.

You’ll find all sorts of table scrap tutorials on YouTube, explaining how you can plant individual garlic cloves, get celery to regrow from its base, and cultivate a thriving mint crop from a single cutting.

To learn how to grow your own ginger, papaya, and pineapple, check out the Inquirer’s tutorial with Snyder at inquirer.com/food/how-to-grow-your-own-ginger-papaya-pineapple-20190624.html.
https://www.inquirer.com/health/coronavirus/gardening-vegetables-plant-vegetables-containers-garden-yard-coronavirus-philadelphia-new-jersey-20200330.html

Money pouring into distressed real estate funds

Florida-based Kayne Anderson is having to turn investors away after raising $1.3B in two weeks for a fund targeting distressed property sales. The company says it would typically take 12-18 months to raise such an amount. According to Preqin, in early April there were 939 commercial funds globally looking to raise just shy of $300B.

Severe stress for commercial property is likely going nowhere even after the economy begins to reopen. It’s hard to imagine hotels and shopping centers operating at anything close to full capacity for months, if not years. And if this work-from-home trend gets a foothold, demand for office space isn’t looking good.

Among those who have made fortunes from a distressed property in the past and who will likely do so again are Sam Zell, Blackstone (NYSE:BX), and KKR (NYSE:KKR).

For those interested in investing alongside Zell, there’s Equity Commonwealth (NYSE:EQC), where he’s board chairman. It’s market cap mostly in cash, the company is more or less a vehicle for Zell and team to buy distressed assets on the cheap.

https://seekingalpha.com/news/3562617-money-literally-pouring-distressed-real-estate-funds

Rent payments dive for strip mall owners

Owners of the more than 30,000 strip malls in the U.S. have been paid only between 30% and 50% of April rent, according to commercial property researchers at Green Street Advisors.

That puts the outdoor plazas on course for far larger declines in annual income than they endured during the global financial crisis, highlighting the scale of the disruption caused by the coronavirus shutdown.

Despite the pressure, Green Street said listed operators should have balance sheet strength to emerge from the crisis intact, compared to landlords of indoor shopping malls, some of which are heading for financial restructuring.

Related: RPT, CDR, SKT, SPG, PEI, MAC, CBL, WPG, EPR, FRT, WSR, KIM, TCO

https://seekingalpha.com/news/3561878-rent-payments-dive-for-strip-mall-owners

Home-Based Businesses Are Coming

With the rapid spread of Covid-19, working from home is having a moment. With most major cities now under stay-at-home orders and nonessential businesses closing down across the country, millions of Americans are working remotely for the first time. Will it stick?
Indeed, even before the coronavirus and self-quarantining, more and more Americans have been running businesses from home. According to recent research, the number of home-based businesses nearly doubled between 1992 and 2012, constituting one in six businesses by 2014. Evidence from this period indicates that such businesses are more likely to be run by people otherwise excluded from conventional work: single parents, the disabled, the unemployed, and caregivers, among others.
The steady rise of home-based businesses has clearly escalated in recent years. Pull up Google Maps for any suburban neighborhood and see for yourself. In one neighborhood in Lexington, Kentucky, for example, notification bubbles rise above a half-dozen single-family homes for businesses such as African hair-braiding, artisanal candle-making, and software development. Though growing, such home-based businesses remain largely invisible, in part because they are often illegal under current zoning laws. In addition to the risk of fines and penalties, this leaves many home-based entrepreneurs unable to secure financing to expand their businesses.
In a study for Utah State University’s Center for Growth and Opportunity, we explored these regulatory barriers to entrepreneurship and possible avenues for reform. The challenge for home-based businesses, it turns out, is that many zoning ordinances were written before World War II. As a result, the provisions regulating when and how people can work from home are often antiquated. Few current lists of permitted businesses even mention the Internet.
Where certain home-based businesses are allowed, a host of detailed regulations makes legally operating them nearly impossible. In most cities, for example, it’s illegal to have any clients, customers, or employees visit as part of operations, making popular home-based businesses like daycares and tutoring prohibited in residential areas. Equally common are bans on businesses involving sales, keeping inventories, or using technology not normally found in a home.
If these rules were too strict from the start, the issues have only intensified during the digital age. Services like eBay and Amazon have allowed more Americans to run retail businesses from home—and made bans on residential-based retail increasingly out of step with reality. The same applies to many other popular small businesses, from tax preparation to computer repair—both now online services. Outdated restrictions are now having a detrimental effect. In a recent case in northern Virginia, for example, regulators spent two years fighting with a home-based direct-sales operator. Her offense: storing dresses in her home. Meantime, in Nashville, regulators find themselves in a multiyear battle with a music producer over recording musicians in his home studio.
Ironically, while northern Virginia and Nashville spent 2017 trying to stifle home-based entrepreneurs, they were simultaneously offering billions in subsidies trying to lure a second headquarters for Amazon—itself a former home-based business. Obsolete codes could undermine the Amazons of tomorrow. Iconic brands like Disney and Harley Davidson, which both began as home-based businesses, might not exist today were they subject to these laws.
The good news is that reform is in the air. In cities like San Diego, regulators have largely scrapped old rules and costly permits. In Arizona, state policymakers came close to adopting a law that would allow “no impact” home-based businesses to operate statewide. Other states, such as Colorado and California, have developed workable rules for common home-based businesses such as “cottage foods” and daycares. But these encouraging trends remain the exception. For every San Diego, there are a half-dozen cities like Charlotte, which conditions home-based entrepreneurship on a tight set of regulations and a $145 permit.
If yesterday’s futurists overstated the extent to which the Internet would usher in an era of remote working, perhaps we underappreciate its virtues today. As many Americans experiment with working from home in the weeks and months to come, an untold number may join the ranks of home-based business operators—and never return to a conventional office. Are cities ready for that?
https://www.city-journal.org/covid-19-rise-of-home-based-businesses

How to Get Your Lender to Say Yes to Forbearance

Like many property owners these days, New York-based JEMB Realty requested a six-month forbearance for its CMBS loan on 75 Broad Street, a 34-story, 671,366-square foot building in Manhattan. The request was denied, according to Trepp.
The company’s request for forbearance was referred to the special servicer, which reviewed the request and determined the borrower still had the cash flow to continue to make debt service payments, according to the watchlist notes. “If the borrower receives further tenant rent relief request and shows a decrease in cash flow then the special servicer will review the request,” Trepp reported.
Certainly there are more hoops to jump through when requesting forbearance with a CMBS loan, but the special servicer’s reasoning is instructive for such requests across all lender types: namely, the borrower has to demonstrate a legitimate need for relief.
As the coronavirus continues to wreak havoc on the US economy and the commercial real estate industry, more and more property owners are approaching their lenders. Many of these lenders are willing to work with borrowers but there are also plenty of examples of lenders denying the requests because they feel it is not necessary.
There are some tactics borrowers can try, however, that may nudge a lender into looking more favorably on its request, according to a recent webinar hosted by ULI.

Have a Detailed Plan

Generally lenders are responding positively to these requests although some are saying no to borrowers that can’t prove a legitimate need, Zachary Streit, SVP at George Smith Partners, said.
“But while banks are being receptive to helping out, I can’t encourage sponsors enough on using best practices in their approach. They must have a coherent plan and presentation in place, including a log of conversations with tenants and when they applied for a loan under the Payment Protection Program,” he said.
Borrowers should proactively call their lender and tell it the situation and what is being done to address it, he says. Go over the components of the plan over the phone and then send them the details as a follow up, Streit advises.

Be Attuned to What Your Lender Wants

This approach can be refined depending on what type of lender it is, said Allan Glass, a partner at HATCHspaces LLC and president and CEO of ASG Real Estate.
“We have a mix of equity partners as lenders ranging from friends and family in smaller deals and institutional investors in larger deals,” he said.
The friends and family lenders just want to know we are on top of it, he continued. “A lack of communication is the worst that can happen.”
The institutional partners, on the other hand, want to be more involved in the discussions and decisions, he said.
Some lenders can be very flexible, Glass said. He told of a private money lender that has provided a construction loan on an empty building. “He has been very adaptable to whatever changes we have had to address during the process.” There is another construction loan on an open and active building that is partially under development.
That lender “wants to know that we are talking to tenants and managing the expectations in our loan documents. It is making sure we are aware of what the debt service ratio requirements are and funding the construction components of our loan.”
Christopher VanArsdale, managing partner with Heleos has found that CDFIs are extremely flexible and “willing to shift on a dime. If we need to postpone or delay they are willing to renegotiate.”
The GSEs on the other hand have “gone berserk” with new requirements, VanArsdale continued. “We are renegotiating everything we thought we had term sheets for. We are attempting to over communicate to make sure everyone is up to date on collections. Right now we are not sure how things will shake out and what forbearance will look for us with agency debt.”

Disclose Lease Amendments ASAP

As landlords talk with their tenants about rent relief, they have to be careful that any lease amendments they make don’t trigger a loan liability.
Streit said that he has heard of lenders triggering bad boy carve outs for not getting permissions for lease amendments.
“We do encourage borrowers to disclose those as quickly as possible and to get consent,” he said. However, sometimes that isn’t possible. His advice is to do what you have to do so long as you are acting in good faith.
The borrower should have as much dialogue with its lender as possible, preferably using a consultant or attorney to facilitate the flow of information, he said. “If all this is done in good faith and the lease amendment preserves the asset’s value it should be net favorable.”
https://www.globest.com/2020/04/17/how-to-get-your-lender-to-say-yes-to-forbearance/

April’s Apartment Rent Defaults Weren’t That Bad After All

When the National Multifamily Housing Council reported a drop in April rent payments last week, executives acknowledged the numbers could improve as they expected many tenants would be paying late.
Turns out, they were right.
In its weekly update to its rent tracker report, the association found that 84% of apartment households made a full or partial rent payment by April 12, up 15 percentage points from April 5.
All told, 90% of renters made full or partial payments from April 1-12, 2019, compared with 91% of renters in March 1-12, 2020, according to theNMHC. That is a payment rate of 93% compared to the same time last month.

NMHC surveyed 11.5 million units of professionally managed apartments in the US, across a wide variety of market-rate rental properties.
Separately, LeaseLock found that payments in April were only down 5% compared to January through March for renters that pay in the first 6 days of the month.
“My initial reaction to these numbers is that I am relieved given the size of job cuts,” says Greg Willett, chief economist of RealPage. “What I see right now are manageable challenges.”
Even the Class C apartment buildings, which were widely assumed to have problems given its typical tenant base, are doing relatively well, Willett continues. “Class C is lagging a little bit behind but even these are not in a big hole. The difference [between Class C and Class A and B] is 5 percentage points.”
Individual landlords report similar payment rates. For example, Camden CEO Ric Campo reports that the REIT is at a 93% payment rate compared to the pace seen in January and February. “We feel pretty good with the pace. Some tenants that have job dislocations are having more trouble but on other hand people understand they really need to pay their rent because of services the industry provides.”
Avanath Capital, which provides affordable housing, is seeing the same trends, says CEO Daryl Carter. About 85% of its tenants are tax-credited or Section 8 and it is seeing a 93% payment rate as well. The government support has been a help, Carter says. That said, the company is concerned about May rents especially for markets such as Orlando, which is close to the Walt Disney World Resort. Disney has furloughed or laid off most of its employees there, he notes.

Moral Hazard

Indeed, despite the April numbers, the industry is concerned about May payments as unemployment numbers are expected to continue to rise. NMHC president Doug Bibby notes that delays have been reported in getting assistance to residents. “It is our hope that, as residents begin receiving the direct payments and the enhanced unemployment benefits the federal government passed, we will continue to see improvements in rent payments,” he says.
Other stats suggest that apartment renters’ relative timeliness with their April rents may be short-lived. A rise in credit-card payments is also contributing to a higher rate of rent payments, according to the Wall Street Journal. Entrata showed a 13% increase in credit-card usage in April compared with the first three months of the year an Zego found that the number of tenants paying rent with a credit card during the first week of April rose 30% compared with the same period in March.
Campo, for his part, is concerned about a moral hazard issue taking hold among renters. Rent strikes have popped up in a number of cities, he notes. “The longer this goes on, more people will come to think they don’t have to pay rent. We still need to advocate with Washington to deal with structural issues as evictions.”
https://www.globest.com/2020/04/16/aprils-apartment-rent-defaults-werent-that-bad-after-all

Fannie Mae sees sharp drop in 2020 homes sales

Fannie Mae (OTCQB:FNMA -0.6%) sees 2020 homes sales declining ~15% due to COVID-19, jibing with today’s dip in homebuilder confidence.

Projects purchase originations of $1.11T this year vs. $1.28T in 2019.

Sees refinances rising ~$400B this year to $1.41T.

Forecasts Q2 real GDP falling 25% annualized.

Expects full-year 2020 output contracting 3.1% and full-year 2021 growth of 4.8%.

https://seekingalpha.com/news/3560938-fannie-mae-sees-sharp-drop-in-2020-homes-sales

IRS Extends Deadlines For 1031, Opportunity Zone Investors

Investors who have like-kind exchange or opportunity zone deadlines between April 1 and July 15 now have a little more time to close their deals. The IRS issued new guidance Thursday night that granted all taxpayers, including “trusts, estates, corporations and other non-corporate tax filers” a filing extension until July 15.

The National Association of Realtors told its members the decision benefits investors who are involved in 1031 exchanges or opportunity zone investments. With 1031 exchanges, investors who have to either identify or close on a property between April 1 and July 15 now have until July 15.

Although many experts called for the IRS to extend these deadlines, what the agency released Thursday night was met with more confusion than applause. It doesn’t address like-kind exchanges or opportunity zone investments specifically, but tax experts agreed they are covered under the broadening of the extension.

“Lots of really smart and really knowledgable people are just scratching their heads on this,” said Suzanne Goldstein Baker, the general counsel of Investment Property Exchange Services Inc.

“It’s different because it’s broader, because it covers a lot of ground,” but the guidance does not address 1031 exchange provisions specifically, said Baker, who is the co-chair of the government relations committee of the Federation of Exchange Accommodators. “It’s mind-numbing.”

1031 like-kind exchanges allow real estate investors to sell one asset — from condominiums to warehouses to office buildings — identify a similarly valued property to buy with the proceeds within 45 days and close on it within 180 days. In doing so, those investors can avoid paying any capital gains taxes on the sale.

Under the new IRS guidance, the 45-day deadline and the 180-day deadline could be extended out to July 15, assuming either of those dates falls between April 1 and July 15.

But if an investor now has until July 15 to identify the property, the original 180-day closing date would likely remain since it falls outside the affected date ranges, Baker said.

Numerous prominent commercial real estate organizations — including the Associated General Contractors of America, The Real Estate Roundtable, the Building Owners and Managers Association, the National Multifamily Housing Council, the International Council of Shopping Centers, NAIOP and NAREIT — recently petitioned U.S. Treasury Secretary Steven Mnuchin to extend the deadlines by which investors can purchase replacement properties for recent sales by adding 120 days to both deadlines.

The IRS has allowed similar delays in the past through disaster declarations in certain geographic locations that have experienced natural disasters or emergencies. Calls to the IRS were not returned as of press time.

It was unclear if the IRS was considering other specific coronavirus relief for like-kind exchanges or if the new guidance would be the extent of it. NAR spokesperson Wesley Shaw said the organization doesn’t expect any further immediate IRS guidance on like-kind exchanges.

“If we are approaching July 15 and it appears that exchanges can’t be completed because of then-current conditions, work might begin again on extension,” Shaw said in an email.

Greenberg Glusker Fields Claman & Machtinger partner Warren “Skip” Kessler said he was disappointed by the IRS actions. Kessler represents real estate firms and owners, including those in 1031 exchange investments.

“In the past, the Section 1031 extensions were 120 days and even longer in certain circumstances. Acquiring commercial real estate is a complex process and often results in a decision not to proceed after several months of effort. Further, financing in the best of times is challenging and time-consuming,” Kessler wrote in an email. “Add to the usual concerns, that pricing is uncertain when even Fortune 50 companies are not paying their rent and many existing tenants will close their doors, I would not be surprised if the real estate lobbied for longer time periods for 1031 extensions and believe it is appropriate to do so.”

Nonetheless, NAR officials hailed the IRS move.

“During recent weeks, NAR strongly advocated for tax payment deadline extensions — including for 1031-like-kind exchanges and Opportunity Zone investments — as this pandemic left small businesses and independent contractors particularly vulnerable,” NAR President Vince Malta said in a release. “NAR’s federal advocacy team in Washington has kept in constant contact with the IRS and Treasury Department since this crisis began, and the deadlines extended Thursday will provide immediate relief from some of the disruptions caused by COVID-19.”

Despite the confusion, Baker said, the move does provide some relief to those under the gun to make property purchases.

“Frankly, the IRS doesn’t have to do anything,” Baker said. “[Investors] may not have the three-tiered wedding cake with a cherry on top, but they have something more than they had yesterday.”

https://www.bisnow.com/index.php/national/news/economy/nar-recent-irs-tax-deadline-extensions-benefit-1031-exchanges-103865